Mid-term Test Week 5 Flashcards
1/ Economics is best defined as the study of #W4R1
A- how society manages its scarce resources.
B- how to run a business most profitably.
C- how to predict inflation, unemployment, and stock prices.
D- how the government can stop the harm from unchecked self-interest.
1/ Economics is best defined as the study of #W4R1
A- how society manages its scarce resources.
B- how to run a business most profitably.
C- how to predict inflation, unemployment, and stock prices.
D- how the government can stop the harm from unchecked self-interest.
2/ Your opportunity cost of going to a movie is #W4R1
A- the price of the ticket.
B- the price of the ticket plus the cost of any soda and popcorn you buy at the theater.
C- the total cash expenditure needed to go to the movie plus the value of your time.
D- zero, as long as you enjoy the movie and consider it a worthwhile use of time and money.
2/ Your opportunity cost of going to a movie is #W4R1
A- the price of the ticket.
B- the price of the ticket plus the cost of any soda and popcorn you buy at the theater.
C- the total cash expenditure needed to go to the movie plus the value of your time.
D- zero, as long as you enjoy the movie and consider it a worthwhile use of time and money.
3/ A marginal change is one that? #W4-R1
a. is not important for public policy
b. incrementally alters an existing plan
c. makes an outcome inefficient
d. does not influence incentives
3 A marginal change is one that? #W4-R1
a. is not important for public policy
b. incrementally alters an existing plan
c. makes an outcome inefficient
d. does not influence incentives
4/ Adam Smith’s ‘invisible hand’ refers to…? #W4-R1
a. the subtle and often hidden methods that businesses use to profit at consumers’ expense
b. the ability of ftee markets to reach desirable outcomes’ despite the self-interest of market
participants
c. the ability of government regulation to benefit consumers’ even if the consumers are unaware
of the regulations
d. the way in which producers or consumers in unregulated markets impose costs
4/ Adam Smith’s ‘invisible hand’ refers to…? #W4-R1
a. the subtle and often hidden methods that businesses use to profit at consumers’ expense
b. the ability of ftee markets to reach desirable outcomes’ despite the self-interest of market
participants
c. the ability of government regulation to benefit consumers’ even if the consumers are unaware
of the regulations
d. the way in which producers or consumers in unregulated markets impose costs
5/ Governments may intervene in a market economy in order to…? #W4-R1
a Protect Property rights
b. correct a market failure due to externalities
c. achieve a more equal distribution of income
d. all of the above
5/ Governments may intervene in a market economy in order to…? #W4-R1
a Protect Property rights
b. correct a market failure due to externalities
c. achieve a more equal distribution of income
d. all of the above
6/ If a nation has high and persistent inflation, the most iikely explanation is…? #W4-R1
a. the central bank creating excessive amounts of money
b. unions bargaining for excessively high wages
c. the government imposing excessive levels of taxation
d. fums using their monopoly power to enforce excessive price hikes
6/ If a nation has high and persistent inflation, the most iikely explanation is…? #W4-R1
a. the central bank creating excessive amounts of money
b. unions bargaining for excessively high wages
c. the government imposing excessive levels of taxation
d. fums using their monopoly power to enforce excessive price hikes
1/ Which of the following is an example of a positive externality? #W4-R2
A. Bob mows Hillary’s lawn and is paid $100 for performing the service.
B. While mowing the lawn, Bob’s lawnmower spews out smoke that Hillary’s neighbor Kristen has to breathe.
C. Hillary’s newly cut lawn makes her neighborhood more attractive.
D. Hillary’s neighbors pay her if she promises to get her lawn cut on a regular basis.
1/ Which of the following is an example of a positive externality? #W4-R2
A. Bob mows Hillary’s lawn and is paid $100 for performing the service.
B. While mowing the lawn, Bob’s lawnmower spews out smoke that Hillary’s neighbor Kristen has to breathe.
C. Hillary’s newly cut lawn makes her neighborhood more attractive.
D. Hillary’s neighbors pay her if she promises to get her lawn cut on a regular basis.
2/ If the production of a good yields a negative externality, then the social-cost curve lies ________ the supply curve, and the socially optimal quantity is ________ than the equilibrium quantity. #W4-R2
A. above, greater
B. above, less
C. below, greater
D. below, less
2/ If the production of a good yields a negative externality, then the social-cost curve lies ________ the supply curve, and the socially optimal quantity is ________ than the equilibrium quantity. #W4-R2
A. above, greater
B. above, less
C. below, greater
D. below, less
3/ When the government levies a tax on a good equal to the external cost associated with the good’s production, it ________ the price paid by consumers and makes the market outcome ________ efficient. #W4-R2
A. increases, more
B. increases, less
C. decreases, more
D. decreases, less
3/ When the government levies a tax on a good equal to the external cost associated with the good’s production, it ________ the price paid by consumers and makes the market outcome ________ efficient. #W4-R2
A. increases, more
B. increases, less
C. decreases, more
D. decreases, less
4/ Which of the following statements about corrective taxes is not true? #W4-R2
A. Economists prefer them to command-and-control regulation.
B. They raise government revenue.
C. They cause deadweight losses.
D. They reduce the quantity sold in a market.
4/ Which of the following statements about corrective taxes is not true? #W4-R2
A. Economists prefer them to command-and-control regulation.
B. They raise government revenue.
C. They cause deadweight losses.
D. They reduce the quantity sold in a market.
5/ The government auctions off 500 units of pollution rights. They sell for $50 per unit, raising total revenue of $25,000.
This policy is equivalent to a corrective tax of _____ per unit of pollution. #W4-R2
A. $10
B. $50
C. $450
D.$500
5/ The government auctions off 500 units of pollution rights. They sell for $50 per unit, raising total revenue of $25,000.
This policy is equivalent to a corrective tax of _____ per unit of pollution. #W4-R2
A. $10
B. $50
C. $450
D.$500
6/ The Coase theorem does not apply if… #W4-R2
A. there is a significant externality between two parties.
B. the court system vigorously enforces all contracts.
C. transaction costs make negotiating difficult.
D. both parties understand the externality fully.
6/ The Coase theorem does not apply if… #W4-R2
A. there is a significant externality between two parties.
B. the court system vigorously enforces all contracts.
C. transaction costs make negotiating difficult.
D. both parties understand the externality fully.
1/ A life-saving medicine without any close substitutes will tend to have? W3-TU
A small elasticity of demand
2/ The price of a good rises from $8 to $12, and the quantity demanded falls from 110 to 90 units. Calculated with the midpoint method, the elasticity is…#W3-TU
1/2
[(90-110)/100]/[(12-8)/10] = 1/2
3/ A linear, downward-sloping demand curve is #W3-TU
inelastic at some points, and elastic at others.
